Prepaid Burial Plans

A question I am often asked by clients is whether or not they should purchase a prepaid burial plan.  I encourage clients to think about how their surviving loved ones will be able to pay for the cost of a parent’s funeral.  The cost of a prepaid burial plan is actually one of the approved spenddown items when someone is in the process of qualifying for medical assistance.

Prepaying for this cost can ease the emotional and financial burden for survivors during this difficult time.  According to AARP, the average cost of a funeral today is $8,000.00. That number is often smaller for people that elect to be cremated instead of having a traditional burial, but either way, it is a hefty price tag.  Some type of planning is a good idea, what that looks like can vary for each family.

When we talk about prepaid burial plans, most of us think about the insurance policy arrangements that you sign up for at the local funeral home.  You purchase a life insurance policy that is assigned to pay the life insurance proceeds to a particular funeral home to be used by your family for the cost of your funeral.  This provides an immediate way for your family to pay for the cost of your funeral without having to put the burden on them to either find the money in your estate or pay out of their own pocket for those expenses.

If you are considering a prepaid burial plan funded with an insurance policy be sure you ask about the refund policy or cancellation policy that would be applied if you later cancelled the contract.  Is the policy transferrable? What if you assign the policy to funeral home in Minnesota, but later move to Florida, can you update the policy to list funeral home in Florida as the beneficiary so the costs will still be covered.  What happens if you lose the policy, family pays for the funeral expenses, but later locates the policy? Read the fine print.

Some funeral homes offer the option of prepaying your funeral expenses by depositing the money into the funeral home’s trust account.  They manage the money on your behalf with the promise that the money will be available when your family needs to use it. Unfortunately, there is the concern that the funeral home may shut down or go out of business.  What happens then? What if you change residence and move to another state? What if you change your mind?

Another option that some families choose is to set up their own separate financial account that is specifically designated to be used for funeral expenses.  You can then add a payable on death designation to direct where that account would get paid upon your death. This option would require some diligence on your part to not “touch” the money to ensure it was available when needed.

The personal savings option makes your money easily portable and can be used at any funeral home.  You are earning the interest from your invested money for yourself. Your family would also have immediate access to this money for all your funeral needs.

Whatever route you choose to take, be sure you do some research and understand the pros and cons of each option.  While I don’t endorse a specific method, I do support the idea that you should do some type of planning. Each person will need to determine what is most comfortable for them and their family.

Please send me an email at with any topic suggestions or requests you may have.  Although we cannot give you legal advice through the column, we can provide some general information that may be helpful for you to know.  Our purpose is to educate and we hope that you can take something new away from this column each time you read it.